Section 108 Loan - American Cities Climate Challenge

Section 108 Loan

Federal Agency

Sub-Department

Community Planning and Development

Purpose

To provide communities a source of financing for economic development, housing rehabilitation, public facilities, and large-scale physical development projects. This is the loan guarantee provision of the CDBG Program allowing communities to leverage portions of their CDBG funds for federally guaranteed loans large enough to pursue physical and economic revitalization projects capable of redeveloping entire neighborhoods. Financing infrastructure with Section 108 Loans Section 108 loans may be used to finance the construction, reconstruction, relocation, clearance, or installation of public facilities including street, sidewalk, and other site improvements that are part of the overall project.

Applicant and/or Project Eligibility Requirements

CDBG funds may be used for activities that include, but are not limited to: acquisition of real property, relocation and demolition, rehabilitation of residential and non-residential structures, construction of public facilities and improvements, such as water and sewer facilities, streets, neighborhood centers, and the conversion of school buildings for eligible purposes, public services, within certain limits, activities relating to energy conservation and renewable energy resources, provision of assistance to profit-motivated businesses to carry out economic development and job creation/retention activities.

Decarbonization Considerations

Section 108's unique flexibility and range of applications make it one of the most potent and important public investment tools that HUD offers to state and local governments. It is often used to catalyze private economic activity in underserved areas in cities and counties across the nation or to fill a financing gap in an important community project. The program's flexible repayment terms also make it ideal for layering with other sources of community and economic development financing including, but not limited to, New Markets Tax Credits (NMTC), Low Income Housing Tax Credits (LIHTC), and Opportunity Zone equity investments. Consider utilizing these funds to influence decarbonization across the power, buildings, and transportation sectors for clean energy and efficiency programs, building retrofits and weatherization, and multi-modal transportation projects that will enhance the safety, resiliency, and air quality of communities.

Equity Considerations

The project must benefit low-moderate income communities and census tracts. The HUD CPD Map Tool may be used to identify low-income census tracts along with other demographic information. One of the best uses of the Section 108 Program is to provide gap financing for projects that promote business growth and create jobs. Visit the Consolidated Plan Process, Grant Programs, and related HUD programs pages for more information.

Helpful Tips

Before considering borrowing against your community's CDBG allocation, discuss current uses of such funds with your local or state administrators of CDBG funding. If already carved out for different purposes, this may not be a viable option. Like CDBG, each activity must meet one of the following national objectives for the program: benefit low- and moderate-income persons, prevention or elimination of slums or blight, or address community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community for which other funding is not available.

Other Notes

For more information on the HUD Section 108 Loan Guarantee process and typical timelines, see: https://files.hudexchange.info/resources/documents/Overview-HUD-Section-108-Loan-Guarantee-Process-and-Typical-Associated-Timelines.pdf

Deadline (Announced or Anticipated)

In parallel to CDBG funding cycle

Funding Available

Current Availability of Section 108 Financing - CDBG Entitlement and State Grantees: https://www.hudexchange.info/resource/5197/current-availability-of-section-108-financing-cdbg-entitlement-and-state-grantees/

Max Award Amount

Loan amount can be up to 5X the CDBG annual allocation

Expected Allocations

Varies by municipality and state

Average Award (Estimated)

Varies by municipality and state

Matching Funds

Borrower is required to secure the loan by pledging current and future CDBG allocations to repay and secure the loan.

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